Doing Business in Egypt Challenges & Opportunities Athanassios - - PowerPoint PPT Presentation

Doing Business in the Arab World Arab Hellenic Chamber of Commerce & Development (Athens, 22.3.2017)

Doing Business in Egypt Challenges & Opportunities

Athanassios Makrandreou Minister Plenipotentiary (Economic & Commercial Affairs) Embassy of Greece in Cairo

EGYPT: Basic macroeconomic data

Source: Central Bank of Egypt (CBE) * 1st half 2016/2017 Others: February

Fiscal year: July/June 2013/14 2014/15 2015/16 Recent GDP (in EGP trillion. – current prices) 2,102 2,444 2,708 GDP (in EGP trillion – fixed prices 2011/12) 1,729 1,838 1,917 Real GDP change (%) 2,2% 4,4 % 4,3% Inflation (end of June, %) 8,20% 11,39% 13,97% 31,7% Unemployment (%) 13,0% 12,8% 12,7% Exports ($ billion) 26,02 22,24 18,70 10,4* Imports ($ billion) 60,18 61,30 57,39 28,3* Trade balance ($ billion)

• 34,16
• 39,06
• 38,68
• 17,9*

Trade balance (% GDP)

• 11,2%
• 11,7%
• 11,5%

Current account balance ($ billion)

• 2,78
• 12,14
• 19,83
• 9,4*

Current account balance (% GDP)

• 0,9%
• 3,6%
• 5,9%

Net international reserves ($ billion) 16,69 20,08 17,55 26,54 Fiscal deficit (% GDP) 12,2% 11,5% 12,3% 5,4% Net foreign direct investment ($ billion) 4,18 6,38 6,93 7,4 Foreign debt ($ billion) 46,07 48,06 55,76 Foreign debt (% GDP) 15,4% 14,8% 18,1% Domestic debt (EGP trillion) 1,817 2,116 2,620 Average exchange rate against $ 7,14 7,53 8,78 18,1

Main macroeconomic issues (1)

 Serious decrease in the inflows of FDI, foreign

tourism and remittances from Egyptians abroad during the post-2011 period

 Dramatic decrease in foreign exchange inflows,

leading to serious shortages & creating problems in trade and investor payments, which had a negative impact on the overall business climate

 Fiscal imbalances due to decreased revenues and

adherence to social support expenditure

 Although situation is improving slowly, market

inadequacies & shortages of some goods in the domestic market are still present, mainly due to the insufficiencies in foreign exchange availability

 Economic reform program implemented by the Government

and backed by the IMF – Support from World Bank

 Introduction of VAT in September 2016, floating of the

exchange rate regime of the Egyptian pound in November 2016

 The Egyptian Government is formulating strategies for

invigorating the domestic industry and exports, as well as attracting foreign investment

 Rationalization of the economy – cuts on subsidies – focused

social support – cut red tape

 Improvement in basic economic indices generate optimism  Revenue expectations from the giant natural gas findings

encouraging to the economy – Start of production end of 2017

 Megaprojects materialization – a real booster

Main macroeconomic issues (2)

Advantages of Egypt as our business partner

 Strategic position in the Mediterranean  Strategic position in the Middle East and Africa  The biggest market in the Arab world  The most stable country in the region  Greece’s gate to the broader region  Long term growth forecasts + Africa perspectives

Bilateral Trade Greece-Egypt 2012-2016

In million €

2012 2013 2014 2015 2016

2015/16 %

Exports

345,39 548,74 753,20 1.042,98 750,07

• 28,1

Imports

444,39 578,44 843,63 657,37 577,02

• 12,2

Trade Volume

789,78 1.127,18 1.596,83 1.700,35 1.327,09

• 22,0

Trade Balance

• 99,00
• 29,70
• 90,43

385,61 173,05

• 55,1

Source: HELLENIC STATISTICAL AUTHORITY (ELSTAT)

Bilateral Trade Greece-Egypt 2012-2016

• 200.00

0.00 200.00 400.00 600.00 800.00 1,000.00 1,200.00 2012 2013 2014 2015 2016 345.39 548.74 753.20 1,042.98 750.07 444.39 578.44 843.63 657.37 577.02

• 99.00
• 29.70
• 90.43

385.61 173.05 Exports Imports Trade Balance In million € Source: HELLENIC STATISTICAL AUTHORITY (ELSTAT)

Top 20 Greek products exported to Egypt (2016)

EXPORTS CN4 PRODUCT DESCRIPTION VALUE (€) QUANTITY (KG) % VALUE % QUANTITY 2710' Petroleum oils and oils obtained from bituminous minerals, other than crude 492.017.547 1.405.701.436

• 34,7%
• 10,3%

5201'Cotton, not carded or combed 55.425.132 39.282.464 6,5% 2,3% 2713' Petroleum coke, petroleum bitumen and other residues of petroleum oils 51.863.560 392.684.959

• 40,4%
• 18,6%

2711'Petroleum gases and other gaseous hydrocarbons 34.831.901 120.821.659 484,1% 607,4% 0808'Apples, pears and quinces, fresh 17.404.312 48.128.338

• 22,2%
• 8,7%

2402' Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes 11.073.961 1.168.283

• 8,4%
• 13,7%

1101'Wheat or meslin flour 5.888.702 14.382.900

• 12,0%
• 10,8%

4810' Paper and paperboard, coated on one or both sides with kaolin 5.716.438 14.551.212

• 17,2%
• 4,5%

2008' Fruit, nuts and other edible parts of plants, otherwise prepared or preserved 3.875.657 4.743.256 7,7% 7,0% 2401'Unmanufactured tobacco; tobacco refuse 3.376.722 1.295.496 34,8% 23,4% 3204' Synthetic organic colouring matter, whether or not chemically defined 3.268.200 2.074.813 3,3%

• 3,1%

7210' Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more 2.610.458 4.557.499 8,3% 25,4% 3923' Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics 2.452.657 477.415 15,6% 17,1% 8409' Parts suitable for use solely or principally with internal combustion engines 2.351.909 84.556

• 25,1%
• 8,0%

2618' Granulated slag (slag sand) from the manufacture of iron

• r steel

2.246.484 59.932.000 2527,5% 6559,1% 1507'Soya-bean oil and its fractions, whether or not refined 2.179.000 2.824.170 Ø Ø 0809' Apricots, cherries, peaches (including nectarines), plums and sloes, fresh 2.108.680 5.214.895

• 43,5%
• 24,9%

3806' Rosin and resin acids, and derivatives thereof; rosin spirit and rosin oils; run gums: 2.065.396 1.223.000 101,5% 118,7% 4901' Printed books, brochures, leaflets and similar printed matter 1.866.820 258.299

• 17,2%
• 15,8%

3924' Tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics 1.777.425 112.461

• 81,2%
• 81,7%

2016 CHANGE 2015/16

Top 20 products imported from Egypt (2016)

IMPORTS CN4 PRODUCT DESCRIPTION VALUE (€) QUANTITY (KG) % VALUE % QUANTITY 2709' Petroleum oils and oils obtained from bituminous minerals, crude 411.817.536 1.360.056.855

• 18,8%
• 4,6%

3102' Mineral or chemical fertilisers, nitrogenous 39.579.519 176.199.941 25,0% 72,1% 2710' Petroleum oils and oils obtained from bituminous minerals, other than crude 30.926.499 68.800.606 154,5% 176,6% 0701' Potatoes, fresh or chilled 14.502.087 46.403.800

• 16,9%
• 17,0%

2905' Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives 14.429.729 71.797.122 198,9% 336,8% 3901' Polymers of ethylene, in primary forms 4.885.041 4.331.140

• 1,4%

6,5% 2711' Petroleum gases and other gaseous 4.380.670 12.361.466

• 55,2%
• 45,8%

2505' Natural sands of all kinds, whether or not coloured 3.183.610 110.718.461 5,0% 2,0% 0710' Vegetables (uncooked or cooked by steaming

• r boiling in water), frozen

3.095.286 1.338.086

• 2,4%
• 1,3%

6302' Bedlinen, table linen, toilet linen and kitchen linen 3.083.896 514.325 24,6% 19,3% 2501' Salt (including table salt and denatured salt) and pure sodium chloride 3.057.354 113.696.510

• 7,3%

4,4% 7210' Flat-rolled products of iron or non-alloy steel,

• f a width of 600 mm or more

2.498.869 5.112.125 29,9% 37,4% 3920' Other plates, sheets, film, foil and strip, of plastics 2.341.643 1.320.515

• 30,9%
• 16,9%

2005' Other vegetables prepared or preserved

• therwise than by vinegar or acetic acid

2.310.160 1.955.954 214,2% 256,4% 4107' Leather further prepared after tanning or crusting 2.150.606 136.650 81,7% 97,2% 3104' Mineral or chemical fertilisers, potassic 1.965.143 3.851.800 101,1% 136,5% 4803' Toilet or facial tissue stock, towel or napkin stock and similar paper 1.921.669 2.028.778 18,2% 21,2% 3103' Mineral or chemical fertilisers, phosphatic 1.392.442 7.563.625 17611,0% 14512,9% 4402' Wood charcoal (including shell or nut charcoal) 1.358.705 3.811.201 1,2% 6,1% 3904' Polymers of vinyl chloride or of other halogenated olefins, in primary forms 1.351.159 1.998.000

• 46,4%
• 40,2%

2016 CHANGE 2015/16

Top growth Greek products exported to Egypt (2016)

 Cotton  Natural gas  Prepared & preserved fruits  Unmanufactured tobacco  Synthetic organic coloring materials  Flat-rolled products of iron & steel  Plastic packaging materials  Granulated slag  Soya-bean oil (new entry, 2016)  Rosin & resin acids

Traditional top product categories

• f Greek exports to Egypt
• Mineral fuels & oils (Chapter 27)
• Cotton (Chapter 52)
• Edible fruits & nuts (Chapter 08)
• Tobacco & manufactured substitutes (Chapter 24)
• Plastics & articles thereof (Chapter 39)
• Machinery & equipment (Chapter 84)
• Salt, sulphur, earth & stones (Chapter 25)
• Paper, paperboard, articles of paper pulp (Chapter 48)
• Products of the milling industries (Chapter 11)
• Fertilizers (Chapter 31)
• Preparations of vegetables, fruits & nuts (Chapter 20)
• Chemical products (Chapter 38)
• Tanning & dyeing extracts, dyes, pigments (Chapter 32)
• Iron & steel (Chapter 72)
• Vehicles, parts & accessories (Chapter 87)
• Electrical machinery, equipment & parts (Chapter 85)
• Products of the printing industry (Chapter 49)



BATIMAT EGYPT(construction, building materials, construction machinery & equipment) - recent 1st edition: 9-11.3.2017 www.batimat-egypt.com



FOOD AFRICA (food & beverage) - next edition: 22-24.4.2017 www.foodafrica-expo.com



EGYMEDICA (pharmaceuticals, medical equipment) - next edition: 4-6.5.2017 www.egymedica.com



SAHARA (agriculture, agricultural equipment) - next edition: 27-29.9.2017 www.saharaexpo.com



HACE (hotel & restaurant equipment, catering) - next edition: 30.10-2.11.2016 www.hace.com.eg

Full Egyptian trade fair program available on the web page

• f Egypt Expo & Convention Authority (EECA), at: http://www.eeca.gov.eg/calendar-E-017.html

Important trade fairs in Egypt

Main trade impediments (1)



Egypt’s trade relations with Europe are governed by the Association Agreement, in force since 2004, which provides for the establishment of a free trade area. There is a gradual reduction of tariff levels for agricultural and industrial products, over periods ranging from 3 to 15 years. Still, certain delays and setbacks are noted.

(Information on the EU-Egypt trade relations is available on the site of the EU Delegation to Egypt, at https://eeas.europa.eu/delegations/egypt_en; information on Egyptian tariffs & import procedures available on the EU Market Access Database, at http://madb.europa.eu/madb/indexPubli.htm)



The range of tariff rates for EU-originated products lays between 0% and 32% (with the exception of heavily charged alcoholic beverages)



Since the beginning of 2016, the Egyptian Government has introduced new import legislation (Decrees 991/2015 & 43/2016) requiring foreign exporters to pre-certify & register their manufacturing facilities and products in special foreign exporters’ register. The procedure is very lengthy and has in fact inhibited the imports of numerous European consumer products into the Egyptian market

Main trade impediments (2)



Port congestion and/or slow pace customs clearance



Lengthy inspection procedures at the ports of entry; most of them conducted by the General Organization for Export & Import Control (GOEIC)



Specific local inspection and pre-inspection procedures for specific product categories, e.g. meat & poultry products



Specific packaging, labeling and shelf-life requirements for food products



Actual foreign currency inadequacies and restrictions



Remittance regulations engaging restrictive Bank involvement



Registration &, particularly, pre-shipment inspection cost



Egyptian nationals & companies of Egyptian ownership only, are entitled to import goods (the law is under revision)

BUSINESS SECTORS WITH POSITIVE PERSPECTIVES FOR COOPERATION

▪ Energy & Renewable Energy Sources ▪ Tourism and Real Estate ▪ Food & Beverages ▪ ICT ▪ Shipping and related activities ▪ Logistics ▪ Waste Management ▪ Pharmaceuticals ▪ Franchise

The Egyptian legal framework for investment



The basic Egyptian investment legal framework originates in 1997 (Law 8/1997), that regulates investment in 16 sectors and provides investors with special treatment & incentives in specific industries, such as manufacturing and infrastructure development. The Law of 1997 guarantees the repatriation of profits, the ownership of lands and buildings, accounts on foreign currency, as well as equal treatment between domestic & foreign investors



The Investment Law of 1997 has been amended several times; the most important, so far amendment, was in 2015, through the Presidential Decree 17/2015. The Investment Law of 2015 provided additional incentives and guarantees to foreign investors, reduced the obstacles to investment, as well as the import duties for machinery and equipment deemed necessary for investments, from 5% to 2%. Furthermore, the Law improved the level of protection from bureaucracy and corruption and accelerated the procedures for approval and licensing of investment projects. It also established favorable conditions for concessions of public lands for investment utilization and improved the system of investment dispute settlement



Free zones: Their regime is governed by Law 8/1997. Imports the majority of raw materials and goods are exempt from duties, restrictions and customs procedures. The 10 public free zones, which fall under the jurisdiction of GAFI, are concentrated in the regions of Alexandria, Suez, Port Said, Damietta, Ismailia and Cairo, while 2 zones, in Qeft and Shibin El Kom, are respectively located in Upper Egypt and the Nile Delta



The Egyptian Government is promoting, since the end of 2016, a new investment law , mainly targeting the attraction of foreign investment. According to Government sources, the new legislation provides for additional, targeted tax incentives, according to the geographical area, the nature and the jobs created by investment projects. The incentives mainly consist of tax exemptions and deductions, within specified limits, concerning the overall industrial & commercial activities, as well as the capital gains of investment companies.

Set of measures for attracting investment, as decided by the Egyptian Supreme Investment Council (1.11.2016)

 Free allocation of industrial lands with infrastructure in Upper Egypt  5-year tax exemption for new agricultural and industrial investment projects in Upper Egypt  5-year tax exemption of new companies manufacturing strategic products that either substitute imports, or are destined to export  Extension of the exemption of shares listed in the Egyptian Stock Exchange from taxes on dividends & capital gains till 2020  Granting of incentives to SMEs for complying to tax regulations, tax settlement of older cases  Acceleration of business licensing procedures, through the granting of temporary licenses  Granting of one-year temporary industrial licenses by the Industrial Development Authority (IDA) to non-compliant factories  Allocation of public lands in the New Administrative Capital & the new cities (East Port Said, El Alamein, El-Galala και New Ismailia) with a 25% discount; allocation of lands in new cities in Upper Egypt at a price of EGP500 per m2  Increase by 20-24% of the number of state enterprises to be privatized, over the coming 3 years  Establishment of a National Payment Council, aiming at enhancing the role of the banking system  Enhancement of the role of the private sector in public works, setup of a legal framework for the encouragement of PPPs  Establishment of a Permanent Committee at the Ministry of Investment, destined to examine investors’ complaints and to report to Supreme Investment Council. Settlement of investment disputes within 15 days

Reform action

 microfinance law  competition law (passed)  mining law (passed)  third party contract appeal law (passed)  commercial register law  insolvency and debit restructuring law  customs law  new investment law

Drawbacks in attracting investment

➢ Bureaucracy

➢ Entanglements in the operation of the country’s administration ➢ Administrative opacity and relevant practices (mainly medium & lower level staff) ➢ Inefficiencies in the judicial system ➢ New arbitration procedure a setback ➢ Inadequacies in foreign currency for payback ➢ Unsatisfactory labor productivity ➢ Labor regulations on foreign employees (9:1 ratio)

Greek investment in Egypt

 Egypt is a top destination for Greek investment  The stock of Greek investment in Egypt is estimated at

approximately €800 million, according to official data (ENTERPRISE GREECE 2012)

 However, the real Greek-interest capital invested in Egypt is

estimated as being quite higher; numerous incoming Greek investments originate in other countries (e.g. Cyprus)

 The main fields of Greek investment in Egypt include paper

manufacturing, cement manufacturing, oil & gas exploration and extraction, construction, food industry, manufacturing of building materials & paints, aluminium, irrigation systems, banking, sea & air transportation, training services

Sectors of primary economic interest for Greece, in the scope of bilateral cooperation with Egypt (1)

Sectors of traditional economic interest for bilateral cooperation



Agricultural cooperation, cooperation in agricultural research (phytosanitary harmonization, exchange of information)



Energy, renewable sources of energy (cooperation of public sector and companies, research, investment from both sides)



Transportation (road, air, cooperation between Greek & Egyptian ports)



Environment (exchange of information, research, promotion of joint projects)



Services (banking, tourism, ICT)



Industrial cooperation (development of industrial zones, cooperation in the fields of certification, standardization)



Construction & technical services (joint projects, Greek participation in Egyptian “Mega Projects”, financing, exchange of know-how)



Cooperation in the fields of Culture, Education & Health



Cooperation in the field of water resource management

Sectors of primary economic interest for Greece, in the scope of bilateral cooperation with Egypt (2)

Specific sectors of economic interest & opportunities in the context of the Tripartite Cooperation Greece-Egypt-Cyprus:



Maritime cooperation, cooperation between ports, aiming at restoring and further developing a maritime network connecting the 3 countries



Tourism cooperation, aiming at strengthening tourism flows between the 3 countries & promoting joint tourism packages to third countries



Energy, particularly extraction & transportation of natural gas resources, located in the Mediterranean Sea, between Egypt & Cyprus



Agricultural cooperation (specifically transfer of know-how in the field of

• live tree cultivation)



Infrastructure development



Cooperation in water resource management, desalination, flood protection & land reclamation projects



Cooperation in the field of environmental protection (mainly sea environment)

BIG INVESTMENT OPPORTUNITY AREAS

 MEGA projects

• Suez Canal – Investing in Special Economic Zones
• New Administrative Capital
• Golden Triangle

 1,5 million Feddans development project  Energy projects  Regional, housing and other infrastructure development

projects

 Privatization of state owned enterprises

Hints to business (1)

 Excellent bilateral relations between the two countries at

every level

 Very friendly disposition shown by the Egyptian people

to Greece and Greeks

 Cultural proximity as a comparative advantage  Political stability and hard working Government a very

serious asset

 Steadily improving business climate  Attractive capitalization options on continuously

emerging business opportunities

 Comparatively low tax and labor cost

24 ΓΡΑΦΕΙΟ Ο.Ε.Υ. ΚΑΪΡΟΥ

Hints to business (2)



Prudent selection of partner



Proper legal advisor hiring



Registration with GAFI and pertinent industry entities (associations, federations etc)



Serious consideration of local social and cultural conditions and particularities



Avoidance of unethical practices – Clear cut professional approach



Persistence and perseverance in pursuing targeted access



Personal contact indispensable



Arab speaking staff a big plus



Advance contact with Greek Embassy in Cairo – EcoCom Office recommended



Visa issues to be only addressed to Greek Consulates in Egypt (Cairo & Alexandria)

25 ΓΡΑΦΕΙΟ Ο.Ε.Υ. ΚΑΪΡΟΥ

For further inquiries please contact:

EMBASSY OF GREECE IN CAIRO OFFICE FOR ECONOMIC & COMMERCIAL AFFAIRS 18, Aisha El Taymoureya, Garden City Tel.: +202-27948482, 27952036 Fax: +202-27940684 E-mail: ecocom-cairo@mfa.gr Web site: www.agora.mfa.gr THANK YOU